Promotion fuels sales at GM

Automaker gains while U.S. rivals continue to falter

General Motors Corp. rode a heavily advertised promotion to higher vehicle sales in February, surprising some analysts who had predicted a double-digit decline.

GM's sales rose 3.7 percent, to 308,411, while Ford Motor Co.'s fell 13 percent in February as its profitable truck lines continued to falter. The Chrysler Group, the U.S. unit of DaimlerChrysler AG that's entertaining sales offers, declined 8 percent.

After launching a five-day Presidents' Day promotion, GM extended it by a week to the end of the month, attracting buyers with offers that included zero percent financing plus rebates of $500 on several models.

"We probably dialed back incentives too much in January," GM market analyst Paul Ballew said, adding that GM did not revert to its across-the-board discount habit. "It matters not just how much you're spending but how you spend it. We've become much more surgical and targeted in how we spend those dollars."

The higher incentive spending likely helped GM. Consumer Web site Edmunds.com pointed out GM was the only of the Big Three domestics to raise incentives from January, though GM still had the lowest among the three.

GM spent $2,693 per vehicle in February, up from $2,458 in January. Chrysler spent $3,526 per vehicle in February and Ford $3,084, Edmunds said.

Incentives, it should be noted, typically climb in March as automakers look to shake the winter doldrums, and fresh deals began unfolding Thursday.

Chrysler dubbed March "National Truck Month" and said it would offer Hemi V-8 engines at no charge on Dodge Ram pickups and Durango sport-utilities on top of rebates up to $5,000. The V-8 costs at least $1,000 as an option, depending on model.

Ford signaled it was ready to jump-start the Mustang, whose sales are down 19 percent this year. The current model was introduced nearly two years ago, and sporty models typically cool sooner than that.

"We could step on the pedal anytime soon," Ford sales analyst George Pipas said of Mustang's incentives, which were $1,000 cash back or interest rates of 2.9 to 6.9 percent in February. "Spring is a good time to do it."

Ford said about half of its 33,000-unit decline last month was due to fewer rental cars, but retail sales fell 8 percent. GM's retail sales rose 11 percent.

The F-Series pickup, Ford's most popular and profitable model, was off 12 percent in February and is down 13 percent this year.

Ford said a dispute with Navistar International Corp. that halted shipments of diesel engines had little effect on February sales. A Michigan judge on Wednesday ordered shipments resumed by Monday and told Ford to begin paying for the engines delivered.

Domestic automakers are building fewer vehicles this year partly in light of the reduced sales to daily rental companies that generate little or no profit.

With those cuts, Global Insight expects industry sales to fall about 1 percent this year, to 16.4 million. Lindland also sees declines in housing starts and slowing economic growth further stunting auto sales.

"It is going to be tough to sell that many vehicles without more incentives and more fleet sales," she said.

Industry sales were down 0.5 percent, to 1.25 million, in February, and are off 2.4 percent, to 2.3 million, for the year.

Ford, which lost $12.7 billion last year, said Thursday that it would cut second-quarter production 14 percent, to 770,000 vehicles. Ford said discontinued models such as Taurus and rental car reductions accounted for about 60 percent of that.

GM, which has yet to report year-end financial results, said it would cut production 5 percent, to 1.17 million vehicles. GM attributed two-thirds of that to rental cuts.

GM also said Thursday that it will ask the Securities and Exchange Commission for an extension to March 16 for filing its annual 10-K report.

Thursday was the deadline for filing the report, but GM awaits results from its GMAC financing arm and it has to restate results since 2002. GM has said it expects to post a fourth-quarter profit but a full-year loss for 2006.

Through February, Chrysler's sales are down 4.3 percent. Ford's are off 16 percent, and GM's 6.4 percent.